Is this really a banking revolution? Number of new 'challenger' banks authorised by regulators falls flat despite calls to make process easier

New bank authorisations have remained flat in the year to the end of march, despite calls for ministers and regulators to make it easier for them to enter the market and take on the sector's 'big five'.

According to a review by the Bank of England's Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA), only five new banks have been authorised during the period.

This figure is about the same as the average since 2006, and follows a plea from the British Bankers' Association (BBA) for more support for challenger banks which it's hoped will provide more competition within the industry.

More competition for your money: The review on challenger banks found regulators had held 47 pre-application meetings with more than 25 potential applicants in the latest 12-month period

The BBA recently published an 82-page action plan calling for less onerous capital requirements for new entrants, and measures to encourage local authorities and government departments to deposit money with challenger banks.

It comes amid ongoing concerns about the fall in net lending to small and medium sized firms and the dominance of the Royal Bank of Scotland, Lloyds, HSBC, Barclays and Santander.

The PRA review said changes introduced last year had led to some 'positive developments', and that there had been an increase in pre-application meetings with potential new entrants.

The finding were welcomed by the Government as 'great news for bank competition and choice' .

The review found regulators had held 47 pre-application meetings with more than 25 potential applicants in the latest 12-month period.

This compared with 48 such meetings in 36 months between 2010 and 2012.

On a more positive note, the review found that a new 'mobilisation' option had been taken up by three of the five new banks approved in the latest year period.

This allows firms to be granted authorisation when it has met key elements but with a restriction on their activities due to some areas still falling short.

It said this had been helpful to firms that previously found it hard to raise capital or invest in expensive IT systems without the certainty of being authorised.

Other changes have included capital requirements being reduced to £1million from £5million under the previous regime - alongside a requirement for firms to show regulators a clear recovery plan should they get into difficulty in the future.

PRA chief executive Andrew Bailey says: 'It is clear that the changes introduced last year have been positive for new entrants and will make a contribution to increasing competition and thus benefit customers.'

The five banks authorised in the latest 12-month period included buy-to-let lender Paragon, which announced earlier this year it was dipping a toe into banking with plans to offer savings and car finance.

The other four were offshoots of established non-European banks.

Since the end of the period, Edinburgh-based private bank Scoban has also been authorised by regulators.